The Consumer Financial Protection Bureau (“CFPB”) recently issued a Small Entity Compliance Guide on the Ability-to-Repay and Qualified Mortgage Rule (the “Rule”). The Rule was issued under Dodd-Frank. The Guide provides an overall summary of the Rule and discusses application of the Rule in a Q&A format. The CFPB issued the final rule on January 10, 2013, with an effective date of January 10, 2014.
Entries in Dodd-Frank (17)
Financial institutions are subject to numerous rules governing compensation, including a number we have discussed in prior blog entries. Among the new regulatory developments arising from Dodd-Frank are new disclosure requirements with respect to compensation paid to executives who work at SEC-reporting companies. One example is the “say-on-pay” rule promulgated by the Securities and Exchange Commission (“SEC”), which is already impacting SEC-reporting financial institutions. Additional requirements are already in the SEC’s pipeline. Greg Fryer and Gabriel Weiss, members of Verrill Dana's Securities Law Group, have written an article on recent developments in executive compensation disclosures under Dodd-Frank, applicable to SEC-reporting institutions. In their article, Executive Compensation Reporting After Dodd-Frank: Where We Came From and Where We Are Heading, the authors discuss the evolution of executive compensation reporting requirements and a look at additional future complexities that will be coming down the road.
The OCC, Federal Reserve, CFPB, FDIC, FHFA, and NCUA recently issued notice of a Final Rule establishing new appraisal requirements for “higher-priced mortgage loans” (HPMLs). The Final Rule is being implemented under the Federal Truth in Lending Act and was required under Dodd-Frank. We discussed an earlier proposed version of the rule last November. Whether a consumer mortgage loan is an HPML generally depends on if the interest rate exceeds 1.5% or 2.5% over prime (depending on principal amount) for a first-lien residential mortgage, or 3.5% over prime for a subordinate-lien residential mortgages. There are a number of significant exclusions from requirements under the Final Rule, for example, for property located in “rural counties” and for property acquired from servicemembers.
CFPB Issues Final Rules Governing MLO Compensation Restrictions and Other Requirements under Regulation Z
The Consumer Financial Protection Bureau (“CFPB”) recently issued a final rule (the “Final Rule”) implementing restrictions on mortgage loan originator (“MLO”) compensation under Regulation Z (Truth in Lending), along with additional interpretive guidance. These restrictions, which prohibit MLO compensation based on mortgage loan terms, or “proxies” for such terms, were mandated under the Dodd-Frank Act. In a number of prior blogs, we discussed the CFPB’s evolving guidance on these restrictions. One issue of particular interest was whether profit-based retirement and bonus plans would be prohibited under the rationale that profit serves as a “proxy” for certain loan terms such as interest rate (a view taken by Federal Reserve staff members when the rule was first introduced).
On December 19, 2012, the Maine Bureau of Financial Institutions announced the final adoption of revisions to Regulation 128, Loans to One Borrower Limitation. Under the revised rule, state-chartered financial institutions must evaluate credit exposure to derivatives transactions when calculating lending limits to a single borrower. This modification was adopted to conform to the Dodd-Frank Act, and is consistent with interim final regulations recently established by the OCC for national banks. The relevant portion of the Dodd-Frank Act is scheduled to go into effect on January 21, 2013. Revised Regulation 128 will also go into effect on this date, but state-chartered banks will have until April 1, 2013 to begin using this new methodology for calculating credit exposure.